Soaring prices are making Indians hesitant about buying gold as the Hindu festival of Diwali approaches, despite it being seen as an auspicious time to purchase the precious metal.
Firm international and local prices have made people delay or stagger buying, hoping that prices level off as the annual wedding season starts next month, analysts and consumers said.
Shantilal Makwana is typical of many Indians. He is looking to buy jewelery for his teenage daughter, which he will give to her when she gets married.
However, he has been watching and waiting for three months to see if prices fall.
“I’ve saved up money. It is an auspicious time, but gold is just too costly,” said the 46-year-old, who works at an electronics repair shop in India’s financial capital, Mumbai.
“I will wait till prices drop,” he said.
International gold prices have gone up by 27 percent this year, hitting a record US$1,387 an ounce, as investors look for a safe haven amid continuing economic uncertainty and a weakening US dollar.
Since 2000, when gold was an average of US$255 an ounce, prices have skyrocketed by nearly 400 percent. Industry figures have predicted that prices could hit US$1,450 an ounce by the end of next year.
India is the world’s largest importer of gold, with jewelery bought either as an investment or to wear. Bars, coins and exchange-traded funds are usually purchased for wealth creation.
Demand traditionally peaks in early November on “Dhanteras,” the first day of Diwali.
However, this year could be different, a local industry body said.
“Demand is down by at least 40 percent,” said the director of the Bombay Bullion Association, Haresh Kewalramani, who owns a silverware firm in Mumbai’s jewelery quarter. “People are waiting for a correction.”
Analysts also say demand could waver.
Anand James, chief analyst with trading firm Geojit Comtrade, expects demand to “taper down marginally” this year.
“It will not be a drastic fall, but we could see an impact,” he said by telephone from the southern city of Chennai, which is a major gold center in India.
The country head of the World Gold Council (WGC), Ajay Mitra, said he was confident that sales would pick up.
“Indian consumers are price sensitive. They wait and watch during periods of high volatility, but when prices show signs of stabilizing, demand comes back,” Mitra said.
India buys an average 700 to 800 tonnes of gold every year, making the country the largest consumer of the precious metal in the world.
In the first six months of this year, India bought 365 tonnes of gold — nearly double last year’s volume — worth US$13.5 billion, according to the WGC.
The country’s largest importer, state-run trader MMTC Ltd, has said it plans to bring in more than 200 tonnes of gold in the financial year ending in March.
One of India’s oldest branded retail jewelery chains, Tanishq, which is owned by the Tata conglomerate, says demand for gold jewelery has risen by 10 percent since last year.
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